What Are the Types of Large Business Loans?

Every business needs cash flow at some point. The size of the business doesn’t matter. The purpose of getting a large business loan depends on many factors. A business expansion, new purchases, urgent payments to agents, etc., are the reasons for sudden cash needs. What type of business are you operating? What is the stage of business operations? Every business works in its own manner. Banks and NBFCs offer many types of business loans. These loans can be either small or large business loans.

Types of Large Business Loans

• Business Term Loan

Term loans are a popular form of business loan in India. A business’s credit score is a factor that determines the loan amount. The business loan is given for a fixed term. The tenure is usually between one and five years. You should specify your intended use of the funds when applying for such a loan. You can use the business loan in many ways. One such way is to fulfill financial needs.

• Business Loans for Start-ups

Today, young minds are starting their ventures. They’ve dubbed it “startups.” Most of the time, these young brains search for investors or apply for loans. Since they are new, they don’t have a credit history. Lenders are hesitant to make loans because credit is such an important factor in loan approval. Lenders approve the loan based on the owner’s credit score and personal profile. The firm should be legal on paper. The applicant must produce all the papers correctly. Current account data is studied for the business loan amount, term, and interest rate. Before applying for a loan, the company should have all of its legal documents in order.

• Business Loan for Routine Capital

Firms use large business loans to get help with any sudden money matters. They can use this amount for the firm’s daily needs. Business loans for routine purposes can be used for many purposes. These are to pay daily wages, a new purchase, the inflow and outflow of cash, etc. Retailers, sellers, etc., can use the routine capital loan for export and import. These loans are short-term. Their term period is 12 months maximum. Also, there is no need for any security. It benefits the borrower by using any asset as security.

• Property Loan

Property loans are large business loans amounting to more than ₹50 lakhs. It is a property loan because you must have security to avail of such a huge loan. It is a loan against the property. The asset you will be pledging must be free from legal issues. The payback period ranges from 10 to 20 years. Property can be of any type – personal or business property. The lender will provide a loan amount equal to 70% of the property’s value.

• Invoice Factoring

There are small businesses that suffer from a cash crunch. When a business raises an invoice but doesn’t receive the payments, it faces a cash shortage. The lenders or banks remit funds equal to 80% of the invoice amount. The applicant can repay the loan when the actual payments are received. The loan amount, term period, and interest rate are decided before the loan is approved.

• Business Loan for Machines

One of the types of large business loans in India is for heavy machinery. It is suitable for firms that deal in building and construction. Buying important machines with the help of loans lessens the burden. Most building units require costly machines for their work. A large business loan for machinery is a specific loan. Users must provide security and use the loan amount for the stated purpose. It is advised to take this loan to purchase heavy machinery. The interest rate is lower than that of other term loans.

• Overdraft Facility 

If your firm has an FD with a bank or NBFC, then you can avail of an overdraft facility. Overdraft is one primary type of large business loan. Before allowing for overdrafts, there are several factors to consider. Lenders consider the firm’s credit payment history, inflow and outflow of cash, terms of its FD, etc. The benefit of OD is that the applicant can take out the cash needed and pay interest on the used amount.

• Women Business loan 

Some banks and NBFCs offer women Business loans. These loans are to help women operate their firms. These are mainly for women who have small to medium-sized firms. Such special perks include easy business loans, rebates on interest charges, and quick loan approval.

• Credit Card Facilities 

You can apply for a firm’s credit card. It is used to fulfill short-term needs. You can always use a firm’s credit card when in need. Your firm’s credit card can give you many plus points. These can be credit points, cash back, insurance coverage, etc. However, credit cards have high interest rates. Hence, these cards should be used as the last option.

• Advance to Agents

 You can get an advance in the form of a loan from a bank or NBFC. This amount is equal to some part of the capital from the daily sales. You can return the money taken as part of the daily credit sales. You need to opt for this type of business loan. You can maintain enough cash for the payments. The benefit is that the payment can be made daily.

Conclusion

It is always advised to choose a business loan that fits your business profile. You can always study different types of loans before applying for one. You should always choose the best business loan for your venture. Large Business loans are available at a very affordable interest rate. Banks and NBFCs also provide easy EMIs. The process for a business loan application is very simple. Visit the official website of Piramal Finance for more assistance and finance blogs.